Micromax is striking a rather lucrative friendship with China’s Alipay. Know how

A change of guard in mobile maker, Micromax’s management team has pushed up some notable changes. It’s soon climbing up at no. 2 position in terms of sales and becoming India’s largest home-grown manufacturer of mobile phones, Micromax is keen on selling a 25% stake to a consortium led by Ant Financial Services Group, China's leading online financial services company that owns Alipay. As per a news report by The Economic Times, Micromax has been valued at around $4-5 billion (approximatelyRs 24,000-30,000 crore).

The ET report states, Alipay, China's top online payment solution company and part of the Alibaba Group, is bringing in two to three partners. The proposed deal would see both infusion of capital and exits, partial or total, by existing investors, said the people quoted earlier. An exit will give existing investors significant returns on their investments, sources known to the ET has confirmed.

TA Associates, for instance, currently owns 15% in Micromax, for which it paid around Rs 225 crore five years ago when the company was valued at around Rs 1,500 crore.

However, bringing the deal to fruition would partly depend on resolving differences that are said to have cropped up between the company's promoters and its chairman Sanjay Kapoor, a former CEO of Bharti Airtel's Indian business, over the company's future direction. The four founder promoters — Rahul Sharma, Rajesh Agarwal, Sumeet Kumar and Vikas Jain — own a little less than 80% of the company.

A person having knowledge of the deal confirmed that the "new guard", mainly Kapoor, feels that Micromax should focus mainly on online sales, but the promoters differ, noting that 70% of its revenue still comes from offline, or traditional retail channels. "There are also disagreements over the positioning of the phones and technology adoption. Kapoor believes Micromax should increase its average selling price while promoters feel there is still immense potential in the mass market," one of the people aware of the fact told the financial daily. Despite the differences the deal with Ant Financial Services is on track, said the people cited above.

While Alipay and Micromax have declined to comment, the latter, in an emailed statement on behalf of the company, its promoters and the chairman, added that Kapoor continues to be its chairman and an integral part of the company.

One of the people aware of the development has said, to compete with market leader Samsung and China’s fast growing Xiaomi, the Indian phone makers need something in unique like Alipay to survive the cut-throat competition.

(Image: Reuters)